The dredging industry has received greater attention from the government in the past two-three years. The launch of the Sagarmala programme and the increased focus on developing inland waterways as an alternative mode of transport have boded well for the industry. While the dredging market has come a long way, much still needs to be done. Despite the abundant opportunities, contractors face a plethora of issues in project execution. Discrepancies in soil investigation reports, lack of clarity in bidding documents, skewed risk allocation, lack of technical know-how, and the practice of awarding dredging contracts on a nomination basis, among others, are some of the key issues faced by contractors.
Issues faced and key recommendations
Soil data forms the basis of a dredging contract. One of the main issues faced by contractors is with respect to discrepancies in the soil data. While over a period of time port authorities have started focusing on the various aspects of soil data given in the tender documents, contractors still face difficulties due to variations in them.
Being an underwater activity, contractors are not completely sure of the type of soil they are likely to encounter while executing a dredging project. In addition, locating a rock mass in the middle of a project that was not mentioned in the soil investigation report, makes project execution more difficult, resulting in time and cost overruns. Adding to the issues faced, contractors get hardly any time to do their own soil investigations between the tender invitation and award of the project and have to rely solely on the data provided by the clients.
One of the key recommendations made by contractors is that there is a need to undertake proper soil investigations, and geotechnical and seismic studies prior to awarding a contract. Further, they are of the view that it would be preferable to involve them in the process of soil data collection so that it could be assessed jointly, leaving less room for discrepancies at a later date. Involving contractors from the early stages of project implementation and having proper discussions in pre-bid meetings regarding all the aspects of a project are also imperative for effective execution of dredging projects. Further, regular interaction between the authorities and contractors is also essential.
Another issue is that the conditions stated in the bid documents of dredging projects are stringent and the bidding parameters are not clearly defined. There is a need to have some flexibility in the tender conditions to give more leeway to contractors in project execution, besides sharing all the relevant information with them.
Most of the time contracts are lopsided as the client is unwilling to share the risk equally with the contractor. Further, the long gestation period of projects and the non-inclusion of contractors from the early stages further results in biased contractual terms. In this respect, a well-defined contract with a clear allocation of risks and responsibilities for all the stakeholders is required. Proportionate, if not equal, risk sharing between the client and the contractor is crucial for reducing ambiguity in a project.
Another issue that has been raised by contractors is with respect to dredging contracts. Dredging projects are complex projects that need to be dealt with in a specific way and not like other civil contracts. Indian dredging contracts lack standardisation and mostly rely on International Federation of Consulting Engineers guidelines.
The dredging market also needs expert arbitrators to deal with disputes that arise. Currently, there are a limited number of arbitrators who know the nitty-gritty of dredging contracts. However, in a much-welcomed major development, a recent amendment has brought down the time period for conclusion of arbitration to one year from a much longer duration earlier.
As dredging is a specialised activity, adequate knowledge and technical know-how is a must. With regard to capital dredging, it is essential to deploy a skilled workforce due to the technical nature of the work. Lack of trained manpower to handle sophisticated equipment is another challenge faced by contractors. In this regard, on-the-job training and in-house training of the workforce is essential.
According to contractors, government incentives are required for the overall development of the dredging industry. Currently, most of the dredgers and related equipment are imported, thus increasing the cost for contractors. The government needs to incentivise indigenous manufacturing of dredgers. In addition to supporting the Make in India initiative, manufacturing dredgers within the country will encourage contractors to buy Indian-built dredgers as opposed to the more expensive imported ones.
The practice of awarding dredging contracts to the Dredging Corporation of India (DCI) on a nomination basis has been a long-standing problem for contractors. Besides, many contractors are adamant about bidding for sub-contracting works, reducing the number of bids received for the project, which in turn reduces its competitiveness. Contractors are thus of the view that contracts should be awarded on a competitive basis instead of a nomination basis.
The fallout of Covid-19
As has been the case with other industries, the Covid-19 outbreak has impacted the dredging industry in several ways – labour unavailability, idling equipment, impeded project execution, issues in import of dredging equipment due to lockdown restrictions, additional delays to ensure adherence to physical distancing norms, etc. Hampered project execution has resulted in significant time and cost overruns in dredging projects. However, the timeline or cost relaxations to be given to contractors will depend on the ongoing debate on whether the pandemic should be considered a force majeure event or a change in legislation. Besides, though there was an increase in the pace of technology adoption, this did not work in favour of dredging projects as contractors are required to be physically present at dredging sites and were unable to execute projects due to lockdown restrictions.
While issues related to custom clearance, and labour and equipment mobilisation have brought down productivity levels during the ongoing pandemic, contractors were able to execute maintenance dredging works. Further, with the gradual easing of lockdown restrictions, contractors have been able to resume work almost at pre-Covid levels. Moreover, the monsoon season generally witnesses limited dredging activities, and so the impact of the pandemic and lockdown was not felt as much. Overall, therefore, dredging activities at ports were not acutely impacted.
The way forward
As the country heads towards Unlock 5.0, contractors are expecting more relaxations with respect to project execution. However, the current situation necessitates adherence to the standard operating procedures mandated by the government while implementing projects. On the one hand, while contractors expect the pace of project execution to increase in the coming months, on the other, they are expecting an increase in costs incurred to ensure adherence to government norms.
Overall, the outlook of the dredging industry is positive on the back of abundant opportunities at the existing ports as well as in inland waterways. Given the anticipated demand for dredging, ample scope exists for private contractors as DCI alone will not be able to meet the substantial demand.
Based on a panel discussion among Harsharan Singh Dharni, Chairman and Managing Director, Rock and Reef Dredging; Sanjeev Kumar, Head, Business Development, Adani Ports; and G. PrasadaRao, Deputy General Manager, Contracts, International Seaport Dredging, at a recent India Infrastructure conference